Top official 'seething' over latest publicity

By Bob Freund

IBM's top financial officer was seething Wednesday at the torrent of publicity over the accounting system he oversees.

CFO John Joyce wielded words rarely used in public by what once was one of the world's most buttoned-down companies.

"We've been astounded," he told Wall Street analysts, "over the kinds of things we've read about IBM in the last few months."


At the same time, "we have no interest in rehashing any of it," Joyce said.

But he was irritated enough to straighten out the skeptics' thinking on IBM's accounting practices.

To those who criticized the company's report of a $300 million sale of its optical transceiver unit (coincidentally operated largely from IBM Rochester) and other multi-million-dollar businesses: "Let me be very direct. It is absurd to characterize our Intellectual Property and Custom Development Income as 'non-operational' ... The simple fact is that generating intellectual property and deriving value from it is absolutely fundamental to IBM." Critics claim they are unusual events and should be booked that way.

To those worried about so-called "quality of earnings" issues: While it's true that buying back stock and working with tax rates did generate some earnings in the past, "We don't view this as 'non-operational.' We consider this to be good management."

To those upset with IBM's past reporting on use of pension funds in profits: "It's also true that our overfunded pension plan has contributed to our reported results, following generally accepted accounting principles. In this environment, this is good news for our employees and retirees."

Joyce did not comment on a recent Securities and Exchange Commission probe of some accounting practices. The SEC has said the inquiry was closed without action.

But IBM looks heavily at cash flow, and "we are not distracted by some people who have criticized our earnings by selectively picking one or two items from our overall results," he said.

"So, let me just say once again, we're proud of our accounting and disclosure practices," he said. In short, "We'd like to move on."

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